In the microdata underlying US trade price indexes, 40 percent of products are replaced before a single price change is observed and 70 percent are replaced after two price changes or fewer. A price index that focuses on price changes for identical items may, therefore, miss an important...

If consumers form habits in individual goods, firms face a time-inconsistency problem. Low prices in the future help attract customers in the present. Firms, therefore, have an incentive to promise low prices in the future, but price gouge when the future arrives. In this setting, firms benefit...

We review recent evidence on price rigidity from the macroeconomics literature and discuss how this evidence is used to inform macroeconomic modeling. Sluggish price adjustment is a leading explanation for the large effects of demand shocks on output and, in particular, the effects of monetary...

We establish five facts about prices in the U.S. economy: (1) For consumer prices, the median frequency of nonsale price change is roughly half of what it is including sales (9-12% per month versus 19-20% per month for identical items; 11-13% per month versus 21-22% per month including product...

Empirical evidence suggests that as much as one-third of the U.S. business cycle is due to nominal shocks. We calibrate a multisector menu cost model using new evidence on the cross-sectional distribution of the frequency and size of price changes in the U.S. economy. We augment the model to...

We estimate an empirical model of consumption disasters using new data on consumption for 24 countries over more than 100 years, and study its implications for asset prices. The model allows for partial recoveries after disasters that unfold over multiple years. We find that roughly half of the...